Baby formula shortage1:23

Shoppers are buying up baby formula to send to China sparking a shortage of the powder. Courtesy Seven News

November 10th 2015

2 years ago

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AN ARMY of Chinese expats are raking in six-figure salaries snapping up infant formula from supermarket shelves and reselling the white gold via social media.

The long-running issue of infant formula shortages in supermarkets and chemists has exploded again this week as furious mothers post photos of so-called “daigou”, which translates to “buyer’s agent” or “personal shopper”, stocking up on the highly sought-after a2, Bellamy’s and Karicare brands by the cartload.

The personal shoppers advertise formula, vitamins and other Australian-made health products on Chinese social media platforms such as WeChat and Weibo, and through Alibaba’s online shopping sites Tmall.com and Taobao.com.

Resellers have been able to flip tins of formula for more than double the price. A typical tin of baby formula retails for between $20-$23, and can fetch as much as $100 in some cases.

Ben Sun from Think China, a digital marketing firm which advises businesses on how to target the Chinese market, said there were more than 3000 daigou in Sydney alone, making an average income of $100,000 a year.

“They would be making much more than that if they’re doing well,” he told news.com.au. “Almost every Chinese student would know someone doing this work around them.”

Before it leaves the country, formula will usually go through so-called “souvenir stores”, which pack and ship the tins in lots of under 5kg and label them as gifts or personal use items to avoid paying Chinese import tax.

Souvenir stores have become a cottage industry servicing the growing daigou market in the past few years. At one store in Sydney’s Central Park precinct, boxes ready for shipping can be seen piled high inside the windows.

Five minutes walk away to another store on the busy Broadway strip, boxes are piled inside the doorway and against every wall, next to shelves stacked with vitamins and formula. “Sorry, no English,” the woman behind the desk tells news.com.au.

Boxes piled high in the doorway.Source:news.com.au

The Broadway souvenir store.Source:news.com.au

Packing-and-shipping stores have popped up across Sydney and Melbourne.Source:news.com.au

Meanwhile, at the nearby Woolworths, an elderly Chinese couple questions an employee as he unpacks a stack of a2 Platinum, while another customer scans barcodes using an app on his phone.

In September, Chinese expat Mike Liu of Hurstville in Sydney, told The Australian he had quit his graphic design job to help his pregnant wife source healthcare products to sell to China. “We now have 10 big buyers in China and lots of individual buyers,” he said at the time. “I think this service has a good future.”

A Woolworths spokesman said yesterday the supermarket tried to make sure there was enough stock for all customers. “In the case of baby formula we have an eight can limit per transaction to make sure all shoppers have the opportunity to purchase the items they need,” he said.

However, retailers have proven unable or unwilling to enforce limits on the number of tins each customer can buy. Bellamy’s estimates 40 per cent of its domestic sales last year were shipped to the Chinese market.

The Australian reported that between January and June this year, sales of Bellamy’s products by third parties on Taobao and Tmall reached $27 million, almost double the company’s ­official annual sales to China.

a2 Platinum is highly sought after.Source:news.com.au

Shops can’t stock shelves fast enough.Source:news.com.au

Peter Nathan, chief executive of a2 Milk Company Australia, blamed the shelf shortages not on a lack of supply but on logistic bottlenecks — the retailers simply can’t stock it fast enough.

“That’s absolutely the case,” he said. “Total category sales are significantly up. It’s not that there’s a lack of supply, it’s purely that there’s been a massive increase in consumer demand.”

Mr Nathan said he couldn’t speculate on what proportion of domestic a2 infant formula sales were destined for the Chinese market. “It’s very difficult to quantify, so we don’t have an estimate,” he said.

“Clearly we’re doing everything we can to increase supply from our existing base. We have a longer lead time than most companies based on the need to develop herds of cows that naturally produce the a2 protein.

“Therefore we have to forecast a long way in advance to meet demand. Clearly that demand has been above our forecasts.”

Mr Sun said the stockpiling in recent weeks had been caused by a rush of daigou attempting to cash in before the China-Australia Free Trade agreement, which removes import duties on formula and slashes profit margins.

Mr Sun said the price of infant formula on Tmall Global had already dropped by 50 per cent.

“It’s already starting. Their margins are being reduced as more of the major players in the pharmaceutical business enter China, and the FTA will reduce them even more,” he said.

But he predicts they will still have a market due to the highly personal service they provide. “They know the channel, they are great entrepreneurs, they know how to run a business in China. What they need to learn is how to move forward, maybe think about channel agreements with the brand owners.”